Many people in Singapore have multiple credit cards at the same time, as each card has its own unique advantages. In such circumstances, individuals may be in debt because they owe money to multiple creditors. There are several payments and due dates to keep track of, and the uninterrupted memories of an unresolved balance only increase the tension. If you do not meet the payment deadlines, your debts will only get bigger. A way out of this debt trap is a personal loan called the Debt Management Plan or DCP.
DCP was launched in early 2017 by Singapore’s Association of Banks (ABS) for all Singapore nationals and permanent residents who are having difficulty settling their debts. DCP is a type of personal loan where you can lend a lump sum to settle all your current debts immediately. However, you can only use the help of a DCP for unsecured credit facilities such as personal loans, credit cards, and other lines of credit. Let’s take a look at the pros and cons of a debt repayment plan:
- You only have to make one payment a month, as a DCP puts all of your debts together into a single debt. This will help you save energy and time and reduce the stress of missing a payment as you no longer have to keep track of the different creditors.
- Lower interest rates with a DCP make it easier to settle all your debts and actually make visible progress.
- If a DCP is well managed, you have a better chance of saving some money than spending your entire monthly income on paying bills.
- The biggest drawback of DCP is the potential to make more debt. People who do not pay attention to their expenses and like to play tend to go further into debt.
- Even with low interest rates, it may take longer for you to repay your debt with DCP. In the long run, this will lead to more interest payments. To avoid this, you need to focus on settling your debts as early as possible.
- If you do not pay on time, fines and interest are imposed, which only increase your charges.
If you choose to transfer your DCP to other banks, you must do so three months after sanctioning your DCP. Early termination or transfer of your DCP will incur penalties that the original bank may charge. Because a DCP requires a long commitment, you should complete your research in detail before you apply for a plan.
Once you have completed a debt repayment plan, all your existing credit cards and unsecured debts will be adjourned. You will receive a credit equivalent to your monthly salary. During the time your DCP is active, you will not be able to apply for new, unsecured cards unless you have repaid part of your debt.
To qualify for a DCP, you must be a Singaporean or a permanent resident. You must have a personal fortune of less than $ 2 million, or your income should be in the range of $ 20,000 to $ 120,000 per year. Your consolidated unsecured debts must exceed twelve times your monthly income.
Fees associated with a debt management plan
There are some banks in Singapore charging a fixed processing fee while the others charge up to 3% of the sanctioned loan amount. You should opt for a personal loan to finance your crises, if you can wait a few days. Personal loans are better than prepayments because of fixed monthly payments and low interest rates.
A debt repayment plan helps you to pay a lower monthly amount at low interest rates. In this way, you can focus on a single post each month and have less financial burden. A personal loan in the form of a debt management plan will help you to negotiate with your creditors about the lifting of penalties to lower your loan amount.